The physical market slipped another 2 cents on average Thursday with Northeast points taking the larger hits. In Southern California forecasts of summer-like weather on top of planned maintenance were enough to skew traditional price differentials, and price declines were minimized.

The Energy Information Administration reported a build of 25 Bcf for the week ended April 13, and futures prices continued their retreat. At the close May had posted yet another 10-year low and settled at $1.907, down 4.4 cents. June futures finally dipped below $2, shedding 4.7 cents to $1.995, and May crude oil fell 40 cents to $102.27/bbl.

At Southern California points, nuclear outages and forecast heat inverted typical price relationships. “PG&E Citygate is $2.32 and we [SoCal Citygate] are $2.34. That’s unusual and is because the loads are up; there is maintenance going on, and nuclear outages are still a factor,” a utility trader said.

“There is maintenance at SoCal Ehrenberg and volumes are restricted, and that is on top of the maintenance going on at Needles. There is also some hot weather forecast. Burbank, CA, is forecast to be 89 Thursday and 95 on Friday. That will be a scorcher. Monday is forecast to be 83 in the valley, so prices will probably back off a little bit.”

Quotes on PG&E Citygate fell a couple of pennies, but SoCal Citygate and SoCal Border were flat. Gas on the El Paso S. Mainline was down a penny.

Northeast marketers pointed to low loads as nudging prices lower, but current basis differentials were expected to hold. “The basis of Algonquin to Nymex is pretty low [32 cents] and should stay steady if nothing changes. I think we’ll be in this band for a while. It’s more about what it costs to get gas somewhere than anything else,” a trader said. “Last year that basis exploded because you had to bring gas from Canada. Last year [summer] it got to $1, and any gas from Canada is going to be expensive. You have to bring the gas in on TransCanada and that can be costly. This time of year it will come from Dawn, but in the winter it comes from Alberta.”

Next-day gas delivered to the Algonquin Citygate fell more than a nickel, and parcels into Iroquois Waddington dropped about the same. Tennessee Zone 6 200 L lost a nickel.

Other eastern points escaped with less of a decline. Transco Zone 6 into New York and Tetco M-3 fell a couple of pennies apiece.

Temperatures were expected to be moderate but well above seasonal norms in the Northeast. said Providence, RI’s high of 68 Thursday would rise to 70 by Friday. Well ahead of a seasonal high of 59 for mid April.

Gulf points also retreated. Trunkline E LA fell just less than a nickel and Tennessee 500 L, the Henry Hub and Columbia Gulf Mainline were each down a few cents.

Futures trading centered around the release of government storage data, and traders said “it was doing what we thought it would do. It’s slipping towards that $1.80 figure. There is nothing to rally the market.”

“I think if prices get a little bit lower you will start to see a base being built, at least initially. However if it can’t rally up by 25 cents or so, I think you will see traders push the market lower,” a New York floor trader said.

The inventory report did give traders something of an idea of what lies ahead for the storage season, and it looks as though too many molecules will have to compete for too little storage space. At present, storage stands at 2,512 Bcf, or 919 Bcf more than the five-year average. In the 28 weeks remaining until the traditional Nov. 1 end of the injection season, only 60 Bcf needs to be injected weekly to take storage to 4,200 Bcf, about what capacity should be at that time.

Last year at this time 42 Bcf was injected, and the reported 25 Bcf injection came in right at the five-year average of 26 Bcf. The build showed no sign that the plump 920 Bcf surplus would diminish any time soon. Citi Futures Perspective was looking for a build of 19 Bcf, but a Reuters sample of 27 traders and analysts revealed an average estimate of 25 Bcf with a range of 12-45 Bcf.

At some point rationing of available storage space will have to accelerate. A proxy for the “value” of storage exists in the contango present in the forward curve. May futures currently are $1.040 less than December. As competition for storage builds, that differential should widen.

Market bulls thought they might get something of a break with the low snowpack in the Pacific Northwest and subsequent spring and summer use of natural gas to offset low hydropower. Apparently not so.

“It looked like Mother Nature was going to smile on us with the hydropower situation this year, but they have had a lot of rain in the Pacific Northwest,” said a Rockies producer. “It looks like gas is going to get displaced by hydropower up there again, so there is no joy in Mudville.”

The Northwest River Forecast Center, a division of the National Oceanic and Atmospheric Administration, in a forecast Tuesday said the important April-August flow period at the Dalles Dam on the Columbia River was expected to be 97,003 thousand acre-feet (KAF)/second, 4% above normal but well below last year’s 127,379 KAF flow.

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